ISLAMABAD: While the Senate’s Standing Committee on Finance rejects a plan for the PIA alone to benefit from exemption from the sales tax on import of aircraft, arguing that such an exemption may lead to litigation from competing airlines, the Finance Minister claims that expansion is now subject to IMF clearance.
However, an effort aimed at facilitating the privatisation process of PIA was thwarted by the Senate committee on finance this Sunday. This was in regards to the attempt to exempt Pakistan International Airlines Corporation Limited from paying sales tax when importing new aircraft. However, the Standing Committee on Finance in the Senate has ordered that the government exempt all airlines from paying such tax.
Why the PIA tax exemption aircraft exemption proposal was unsuccessful
The reason for this can be attributed to the fact that this proposal surfaced when the committee was discussing the amendments being made to the Sales Tax Act and the Federal Excise Act through the Finance Bill 2026-27. The committee chairman, Saleem Mandviwala, raised an objection to the proposal that would restrict the relief for only one particular airline.
Even more alarmingly, Mandviwala cautioned that the limitation of the exemption only to PIACL might well lead to legal proceedings from other airlines because they would have ample justification to contest a system that favors just one competing firm. He instructed the finance ministry, Tax Policy Unit, and Federal Board of Revenue to ensure that all airlines are included in the list of exemptions under the Sales Tax Act.
Defence of the government’s argument and the IMF dilemma
Pakistan Finance Minister Muhammad Aurangzeb defended the proposed scope of the PIA tax exemption aircraft plan, which he stated had been made in a context of the privatization of the PIACL and aimed at ensuring the arrival of new aircraft in connection with that process. This defense of the decision makes it more relevant and timely than a general tax exemption.
There was one important exception to his offer, however; for the exemption to be extended to all airlines, he said, required the approval of the International Monetary Fund. Just that simple statement turns a seemingly routine recommendation by the committee into a negotiation that includes Pakistan’s outside financier, creating considerable time delays at the least, but perhaps more serious complications as well.
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Compromise reached by Committee Broadened Framework proposed
Even after considering the problem posed by the IMF issue, the committee did not ignore the issue but made a compromise decision to modify the existing proposal. The compromise was that the exemptive framework should be broadened so as to cover all the airlines in addition to the PIACL, thereby officially endorsing the stance taken by Mandviwala.
What is next?
The decision regarding PIA tax exemption on aircraft will be sent back to the Ministry of Finance, TPU, and the FBR with a clear-cut direction from the committee for widening the scope of the exemption, subject to approval from the IMF. Without this approval, the matter related to tax exemption on PIACL’s aircraft imports, linked with privatisation, will remain in procedural limbo: disapproved in one form but recommended in another.
Nayab Fatima is a university graduate and an emerging media professional with a strong passion for journalism, research, and independent reporting. She specializes in developing well-researched, fact-based, and analytical news stories covering a wide range of sectors, with particular expertise in technology, telecommunications, aviation, and the automobile industry.
